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The Swedish Capital Market: Prospects for Borrowers and Investors – an ICMA Seminar
9 December 2013
Opening Remarks Tim Skeet, Managing Director, Markets, RBS
Johan Wijkström, Senior Vice President, Head of Bank Relations, Swedbank
Keynote Presentation Olof Sandstedt, Head of Banking Analysis Division, Financial Stability Department,
Sveriges Riksbank
ICMA - Swedish Capital Market
9 December 2013
Olof Sandstedt
Financial Stability in Sweden
The views expressed in this presentation should not be
attributed to the Board of Governors of the Riksbank
Agenda
The large Swedish banks & financial markets
The Swedish household sector & house prices
The Riksbank’s recommendations
Financial stability good at present -
but risks need to be managed
Swedish stress index Ranking
Sources: Bloomberg, Reuters EcoWin and the Riksbank Chart 2:3
Five-year CDS premia for European banks Basis points
0
100
200
300
400
500
600
700
11 12 13
Germany Spain France Italy Netherlands Sweden
Sources: Bloomberg and the Riksbank Chart 2:10
Profitability high at the major Swedish banks
Note. Rolling four quarters, SEK billion, fixed prices, September 2013. The broken lines refer to the Riksbank's main scenario in the current assessment.
Sources: Bank reports and the Riksbank
-20
0
20
40
60
80
100
120
91 93 95 97 99 01 03 05 07 09 11 13 15
Profit before loan losses Loan losses
The four Basel III measures December 2012, per cent
LCR
CET 1
NSFR
Leverage ratio
Swedish major banks European banks Minimum level
3 7
100
100
Sources: Bank reports, EBA, Finansinspektionen and the Riksbank Chart 1:4
Swedish banks well-capitalised - but have small percentage of equity to total assets Per cent
Sources: Bank reports and the Riksbank Chart 4:16
House prices continue to rise in Sweden – especially tenant-owned
Note. Index, January 2005=100. Nominal housing prices, seasonally-adjusted. Sources: Valueguard and the Riksbank
100
120
140
160
180
200
220
05 06 07 08 09 10 11 12 13
Tenant-owned apartment Single-family houses
Real house prices Index, 1980 = 100
Source: Statistics Sweden and the Riksbank Note: Nominal house prices deflated by CPI
The Swedish households’ assets and debt Percentage of disposable income
0
100
200
300
400
500
600
700
72 75 78 81 84 87 90 93 96 99 02 05 08 11
Total assets excluding collective insurance Real assets
Liquid assets Debt
Cash and bank deposits
Sources: Statistics Sweden and the Riksbank Chart 3:4
Households expect continued low interest rates
Note. Households’ expectations of the variable mortgage rate, one, two and five years ahead. The interval is a normal interest rate level based on a repo rate of 3.5-4.5 per cent, plus a markup. Per cent.
Sources: The NIER and the Riksbank
0
1
2
3
4
5
6
7
13 14 15 16 17 18
Estimated mortgage interest rates given a repo rate of 3.5-4.5 per cent
Households’ expectations of the variable mortgage rate
Fixed-rate periods for new mortgages Per cent
0
10
20
30
40
50
60
70
80
90
100
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Adjustable rate <5 year >5 year
Source: Statistics Sweden Chart 3:9
New interest-only mortgages in Sweden Per cent
0
10
20
30
40
50
60
70
80
07 08 09 10 11 12
First mortgage Second mortgage
Source: Finansinspektionen Chart 1:12
Financial stability good at present -
but risks need to be managed
The Riksbank recommends
That the risk weight floor for Swedish mortgages be raised
That the major Swedish banks
Continue to ensure they have sufficient capital
Continue to increase the proportion of stable funding
That the major Swedish banks
Disclose NSFR, leverage ratios & LCR in SEK
Panel Session: Resolve and Rubbish; Bail and Bin/The Fate of Senior Creditors under the proposed new rules for dealing with failing banks – The implication of Bail-in, the resolution regime
» Moderator: Tim Skeet, Managing Director, Markets, RBS
» Panellist: Henry Cooke, European Head of Secured Credit, Threadneedle Asset Management
» Panellist: Georg Grodzki, Head of Credit Research, Legal & General Investment Management
» Panellist: Johan Molin, Adviser at the Financial Stability Department, Sveriges Riksbank
» Panellist: Gerry Rawcliffe, Analyst, Western Asset Management
»
Panel Session: The Ingredients of Market Liquidity
» Moderator: Moderator: Rickard Skogsfors, Head of Credit Trading, Swedbank
» Panellist: Ulf Erlandsson, Senior Portfolio Manager, AP4
» Panellist: Kimmy Samuelsson, Head of LT Funding, Swedbank
Panel Session: Public sector funding and the Swedish profile in the
international markets – what are the challenges today and tomorrow
» Moderator: Tim Skeet, Managing Director, Markets, RBS
» Panellist: Per Åkerlind, Executive Director, COO and Head of Lending & Funding, Svensk Exportkredit/Swedish Export Credit Corporation
» Panellist: Carl-Henrik Arosenius, Head of Investor Relations, Kommuninvest i Sverige AB
» Panellist: Thomas Olofsson, Director and Head of Debt Management, Swedish National Debt Office
Closing Remarks
Tim Skeet, Managing Director, Markets, RBS